The mortgage foreclosure process starts with a missed mortgage payment and ends with eviction. What happens in between can largely depend on the homeowner.
Three Steps to Foreclosure
Foreclosure is the process when the lender takes possession of a piece of property or a home if the borrower is not making payments on the mortgage. At any time during the foreclosure process the borrower can stop the process by paying all delinquent payments to the lender.
The process is basically the same in all states; however, the timeframe between each step may vary between states and between lenders. Some states provide the borrower with more time and opportunities to get caught up on their missed mortgage payments. Some lenders provide borrowers with longer grace periods between the first missed payment and the initiation of the foreclosure process.
Step 1: The Missed Payment
A lender will usually call or send the borrower a letter informing them that their mortgage payment is late and due immediately. At this time the lender will also assess a late charge for any missed payments. This contact from the lender usually comes anywhere from two to four weeks after the mortgage payment is missed.
If a borrower is unable to pay the monthly mortgage payment, the homeowner should contact a nonprofit counseling agency to determine the available options to keep the home. In most cases, homeowners will probably be advised to contact their lender and attempt to modify their mortgage loan to reduce the monthly payments. This modification can be done in several ways including:
- Lower the interest rate
- Lengthen the term of the mortgage loan
Borrowers who feel that they are only going to be unable to pay their mortgage payments for a few months may be able to negotiate with their lender to put the missed payments and any late charges at the end of the term of the mortgage loan.
Step 2: The Notice of Default
If the borrower continues to miss mortgage payments the lender will officially notify the borrower that the loan is in default. The notification will spell out what action the lender will take if the borrower does not immediately pay all missed mortgage payments.
If the borrower did not start talking with the lender before or right after the first missed payment, the borrower should be sure to start communicating with their lender in this stage. The borrower should respond to all calls and letters from the lender and should arrange for a meeting to discuss the specific financial situation.
Step 3: The Notice of Sale
The borrower will be given an official notification of the foreclosure if the borrower and the lender are not able to modify the loan and the borrower is not able to pay the lender all missed payments. This notification can take several forms depending on the state in which the property is located. In about half of the states the borrower will be informed that the foreclosure will go into the court system for a decision on when and how they will lose their home. In some states, borrowers are given the choice of whether they want to just hand over the title to the lender or if they want to allow the lender to sell the home to see if the borrower can recoup any of their equity.
Mortgage Foreclosure Process Timeline
The actual timeline for the foreclosure can range anywhere from about six months to several years. The total elapsed time has to do with:
- The laws of the state in which the property is located
- The procedures of the lender
- The steps taken by the borrower
|Date of first missed payment||Mortgage payment due; but not paid by borrower.|
|After 2 to 4 weeks|| Lender charges a late charge for the missed payment. |
Borrower is contacted by the lender.
| After 3 to 6 months
of missed payments
| Lender records a Notice of Default at the County Recorder's Office. |
Lender gives the borrower a period of time (anytime from a week to a month) to pay the missed payments or refinance the mortgage.
Borrower is usually given the choice of a Foreclosure by Sale of the property or a Strict Foreclosure where the title is turned over to the lender (no property sale).
|After about 3 months|| A date for the Notice of Sale or the title turnover is: |
*Given to the borrower *Posted on the property *Recorded in the County Recorder's Office *Posted in the local newspaper
| Date of sale or
turnover of title
|The title is turned over to the borrower or the property is auctioned in public to the highest bidder. The winner of the auction receives the deed to the property.|
|After property is sold or title is handed over|| The homeowner will receive official notice of the foreclosure and must immediately leave the property. |
Some states give the homeowner a redemption period during which they can repurchase the home.
Tips on Avoiding Foreclosure
- Pay your mortgage bill on time. You will avoid late charges and the foreclosure process.
- Set up an automatic payment for your mortgage.
- Get counseling and learn your options to avoid foreclosure before you miss a mortgage payment. Contact a nonprofit counseling service that is certified by the Department of Housing and Urban Development (HUD).
- Talk to your lender if you are unable to make your monthly mortgage payments. See if you can refinance your mortgage or modify the terms to reduce your monthly payment.
- Know your rights. Homeowners have rights throughout all steps of the foreclosure process. Learn the procedures and options in your state.
- Keep talking to your lender.
More Information on LoveToKnow Mortgage about Foreclosures
Homeowners have several options before and during the foreclosure process. Here are a few helpful articles on LoveToKnow Mortgage to give you more information on what can be expected during the foreclosure process: